Mylan sets term B OID; Sequa ups discount; FHC tweaks deal; UAL stronger with amendment

By Sara Rosenberg

New York, Nov. 27 - Mylan Inc. announced the original issue discount on its term loan B as the company launched its credit facility to U.S. investors at a bank meeting in New York on Tuesday.

In other primary happenings, Sequa Corp. increased the original issue discount on its term loan, gave lenders till the end of the day to throw in their orders and is hoping to allocate on Wednesday, and FHC Health Systems Inc. upped the pricing and the discounts on its first- and second-lien term loans.

Also, Renewable Energy Systems came out with price talk on its credit facility as it too launched with a bank meeting on Tuesday.

Meanwhile, over in the secondary, UAL Corp.'s term loan B headed higher on news of a proposed amendment that would allow for a paydown, and cash in general and LCDX were both stronger.

Mylan held a very well-attended bank meeting during market hours to kick off the U.S. syndication of its credit facility, and in conjunction with the launch, the original issue discount guidance on the $3.6 billion seven-year dollar- and euro-denominated term loan B surfaced, according to an informed source.

The term loan B is being talked with a discount in the 98 to 98½ area, the source said.

As was previously reported, pricing on the term loan B is Libor/Euribor plus 325 basis points.

Mylan's $4.85 billion senior credit facility (B1/BB) also includes a $750 million six-year multicurrency revolver and a $500 million six-year amortizing dollar- and euro-denominated term loan A.

The revolver is priced at Libor/Euribor plus 275 bps, with a 50 bps commitment fee, and the term loan A is priced at Libor plus/Euribor plus 325 bps.

Banks are being offered two tickets on the pro rata tranches - as managing agents, they are asked to commit $20 million to the revolver and $30 million to the term loan A for a 75 bps upfront fee, and as co-managing agents, they are asked to commit $10 million to the revolver and $15 million to the term loan A for 50 bps upfront.

The facility was already launched to European investors with a bank meeting in London that took place on Nov. 19.

At the close, the term loan B had been divided into a $2 billion U.S. tranche and a €1.13 billion euro tranche. The size of the euro-denominated component within the term loan A is to be determined based on demand.

There are minimum consolidated interest coverage and maximum consolidated senior leverage covenants contained in the credit agreement.

Commitments from banks and funds in Europe and the United States are due on Dec. 7.

Merrill Lynch and Citigroup are the joint bookrunners and joint lead arrangers on the deal, with Merrill the left lead, and JPMorgan is the administrative agent.

Proceeds from the facility, which actually funded in early October, were used to help fund the acquisition of Merck KGaA's generics business, to refinance Mylan's existing credit facility and to purchase the company's 5¾% senior notes due 2010 and 6 3/8% senior notes due 2015 under a tender offer.

Mylan is a Canonsburg, Pa., pharmaceutical company.

Sequa increases OID

Sequa raised the original issue discount on its $1.2 billion seven-year term loan and told investors that they had until 5 p.m. ET on Tuesday to commit so that the deal could allocate and free up for trading on Wednesday, according to market sources.

The discount on the term loan is now set at 95, compared with original guidance at launch that was in the 98 area, sources said.

Pricing on the term loan was left unchanged at Libor plus 325 bps.

"People really like the credit but the market just wasn't holding up," one source said regarding the decision to up the discount on the term loan.

"It's expected to be oversubscribed at that level," the source added.

Commitments toward the deal were originally due at noon ET on Nov. 21, but that deadline was extended without a new deadline being set until the discount change was announced early on in the day on Tuesday.

Sequa's $1.35 billion senior secured credit facility (B1/BB-) also includes a $150 million six-year revolver that is priced at Libor plus 325 bps, with a 50 bps commitment fee.

There is a maximum senior secured leverage ratio covenant contained in the credit facility.

Lehman Brothers, Citigroup and JPMorgan are the lead banks on the deal, which will be used to help fund the leveraged buyout of the company by the Carlyle Group for $175 per share in cash. The total transaction value is $2.7 billion.

Other buyout financing is expected to come from $700 million of high-yield bonds and about $967.6 million in equity, according to filings with the Securities and Exchange Commission.

Total pro forma debt to pro forma adjusted EBITDA is around 6.7 times, and pro forma adjusted EBITDA to pro forma interest expense is around 1.6 times.

Sequa is a New York-based diversified industrial company.

FHC raises pricing, discounts

FHC Health Systems increased the spread on its first- and second-lien term loans, as well as the original issue discounts on the tranches, according to a market source.

The $175 million six-year first-lien term (B1/B+) is now priced at Libor plus 500 bps, up from most recent guidance of Libor plus 400 bps to 450 bps and original talk at launch of Libor plus 350 bps, and the $85 million 61/2-year second-lien term loan (B3/CCC+) is now priced at Libor plus 850 bps up from original talk at launch of Libor plus 750 bps, the source said.

In addition, the original issue discounts on the first- and second-lien term loans were raised to 98 from 99.

The deal is heard to be pretty much done at the new pricing and discount levels, the source added.

FHC Health Systems' $290 million credit facility also includes a $20 million five-year asset-based revolver that is being held by Merrill Lynch and a $10 million five-year cash flow revolver (B+).

Covenants include total leverage, interest coverage and capital expenditures.

Goldman Sachs is the lead bank on the deal, which will be used to help back the buyout of the company by Crestview Partners.

Leverage through the first-lien debt is 2.3 times, and leverage through the second-lien debt is 3.4 times.

FHC Health Systems is a Norfolk, Va., provider of behavioral health care services.

Renewable Energy sets talk

Renewable Energy Systems announced price talk of Libor plus 112.5 bps on its $144 million credit facility as the deal was launched to investors with a bank meeting on Tuesday morning, according to a market source.

The facility consists of a $133 million one-year construction loan and an $11 million working capital line.

WestLB is the lead bank on the deal.

Proceeds from the credit facility, along with a $172 million institutional loan that runs through construction plus 21 years that will be priced off Treasuries, will be used to back the construction of a wind farm project.

The renewable energy development company is based in Kings Langley, England.

UAL rises on amendment proposal

Switching to trading news, UAL's term loan B traded up on Tuesday after the company approached lenders with an amendment proposal that would, among other things, permit a term loan paydown, according to a trader.

The term loan B ended the day at 94½ bid, 95½ offered, up from Monday's levels of 94 bid, 95 offered, the trader said.

Under the amendment, the company would prepay $350 million of its term loan debt and implement up to $500 million of shareholder initiatives.

The amendment would also provide the company with flexibility for further shareholder initiatives by making additional term loan prepayments.

JPMorgan is the lead bank on the amendment.

The Chicago-based air transportation services provider expects to receive a decision from lenders regarding the amendment later next week.

Cash, LCDX gain ground

The cash market in general and LCDX 9 were both higher during trading as credit concerns were eased a bit by Citigroup's decision to issue mandatory convertibles and Countrywide Financial Corp.'s insistence that liquidity is adequate, according to traders.

The cash market was up by about a quarter to three-eighths of a point with good flows, traders said.

One name in particular that saw a lot of volume for no specific reason was First Data Corp., a Greenwood Village, Colo., provider of electronic commerce and payment services, whose term loan debt was up about a quarter of a point across the board, one trader remarked.

First Data's term loan B-1 ended the day at 94 bid, 94½ offered, its term loan B-2 ended the day at 94¼ bid, 94¾ offered and its term loan B-3 ended the day at 94 bid, 94¾ offered, the trader continued.

Meanwhile, according to traders, LCDX 9 closed out the session around 95.75 bid, 95.95 offered, up from Monday's levels of 95.30 bid, 95.45 offered.

"The market overall felt stronger on Citigroup's convertibles deal and Countrywide's liquidity. Relieved credit concerns," one trader explained to Prospect News.

On Tuesday morning, Citigroup announced that it reached an agreement to sell equity units, with mandatory conversion into common shares, in a private placement to the Abu Dhabi Investment Authority in the amount of $7.5 billion.

"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," Win Bischoff, Citi's acting chief executive officer, said in a company news release.

"This investment also enables us to access capital in an efficient manner, and is consistent with our strategy of maintaining a balance sheet that benefits from highly diverse sources of funding in terms of both geography and type of security," Bischoff added in the release.

The Abu Dhabi Investment Authority has agreed not to own more than a 4.9% stake in Citigroup and will have no special rights of ownership or control and no role in the management or governance.

As for Countrywide, the company said at a conference on Tuesday that liquidity is adequate to meet its operating and growth needs and that its mortgage company has enough liquidity to fund all debt maturities through 2008.

Liquidity at the Calabasas, Calif., financial services company was $35.4 billion at the end of October, up from $33.5 billion at Sept. 30.

Stocks also got a bit of a boost from these positive announcements, with Nasdaq closing up 39.81 points, or 1.57%, Dow Jones Industrial Average closing up 215 points, or 1.69%, S&P 500 closing up 21.01 points, or 1.49%, and NYSE closing up 132.26 points, or 1.41%.

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